How Do You Decide Which Ideas Are Worth Protecting?
Legally reviewed by Thomas Lemler - founder of Lemler IP
A business can spend years building a name that customers recognize and trust, which is why trademarks often become some of the most valuable assets involved in a merger or acquisition. Unfortunately, if trademark ownership is not properly investigated and transferred, the buyer may discover that the rights it believed it purchased are incomplete, disputed, or far more limited than expected. Therefore, companies involved in these transactions should take certain steps to identify every relevant mark, resolve ownership problems, and protect the goodwill connected with the brand. Here are some of the questions you may have:
What Trademark Issues Should Be Reviewed Before the Transaction?
Before completing a merger or acquisition, the buyer should conduct trademark due diligence. Essentially, this means investigating the company’s entire trademark portfolio to determine what the business owns, how those marks are being used, and whether any legal issues could affect their value. Some of the most important matters to review are as follows:
- Registrations and applications: The company should identify all federal, state, and international trademark registrations, along with any pending applications.
- Ownership records: Each mark should be registered in the name of the entity that actually owns and controls it.
- Chain of title: Previous assignments, corporate name changes, and mergers should be reviewed for mistakes or missing records.
- Upcoming deadlines: Renewal dates, maintenance filings, office actions, and opposition deadlines must be identified.
- Licensing agreements: Existing agreements should be checked for transfer restrictions, termination rights, and quality-control requirements.
- Trademark disputes: Pending lawsuits, cease-and-desist letters, cancellation proceedings, and unauthorized uses should be investigated.
- Unregistered marks: The company may also have common-law rights in names, logos, slogans, packaging, or other branding that has never been federally registered.
How Are Trademark Rights Transferred to the New Owner?
The process of transferring trademark rights will depend, in part, on how the transaction is structured. For example, in a stock purchase, the entity that owns the trademarks may remain the same, even though control of the company changes. In an asset purchase, however, the trademarks generally must be specifically assigned to the buyer.
Under federal trademark law, a registered mark or pending application generally must be transferred with the goodwill of the business connected to it. In other words, a company cannot always transfer a trademark as if it were merely a name on a piece of paper. If the associated goodwill is not included, the assignment may be challenged, and the buyer’s trademark rights could be placed at risk. A properly drafted assignment should identify the following:
- The seller and buyer
- Every registration and pending application
- Related common-law trademark rights
- The goodwill associated with each mark
- Relevant domain names and social media accounts
- Branding materials and related intellectual property
- The transfer’s effective date
Certain intent-to-use applications are also subject to special restrictions before proof of use has been filed. It is important to keep in mind that if an intent-to-use application is assigned improperly, it can be voided entirely under federal rules, meaning the buyer gets nothing. Once the transaction is complete, the ownership change should generally be recorded through the USPTO Assignment Center.
How Can the Buyer Protect the Trademarks After Closing?
Rather importantly, protecting a trademark portfolio does not end once the parties sign the closing documents. The new owner must continue using the marks properly, meet all applicable filing deadlines, and monitor the marketplace for infringement. Some of the most important post-closing steps for you to take are as follows:
- Updating ownership and correspondence information with the USPTO
- Transferring all trademark docketing records
- Preserving dated evidence showing commercial use
- Maintaining consistent use across products and advertising
- Reviewing licensees for proper quality control
- Monitoring confusingly similar applications and unauthorized uses
- Filing renewals and maintenance documents on time
Ultimately, if your company is preparing for a merger or acquisition, you should strongly consider hiring a seasoned Washington, D.C. intellectual property lawyer who can secure your IP rights at every turn. Contact Lemler IP for a complimentary initial consultation today.
